Most commercial tenants have a right to a new lease under the Landlord & Tenant Act 1954. The parties try to agree terms of the new lease and ask the Courts to fix them if they cannot. The terms of the old lease are the starting point, subject to reasonable modernisation. Following the tests laid down in O’May v City of London Real Property Co. Ltd [1983] 2 AC 726. Disputes can arise where parties see this as an opportunity to try to improve their commercial position.
Reasonable modernisation and pandemic clauses
Some tenants are requesting clauses to protect themselves in the event of future lockdowns. Arguing that this is reasonable modernisation. For example, the case of WH Smith Retail Holdings Ltd v Commerz Real Investmentgesellshaft MBH (unreported) involved a pandemic rent suspension clause. However, the Court here was only concerned with the mechanics of how such clause would operate. Not whether there should be one in principle.
The County Court case of Poundland Limited v Toplain Limited [2021 unreported] was different. Because the issue of whether there should be a 50% rent reduction if the tenant was unable to trade in a future pandemic was a live issue at Trial. District Judge Jenkins, handing down judgment on 2 July 2021, dismissed the tenant’s claim for such a clause. As well as other attempts to alter the terms of the previous lease in the tenant’s favour. For example, paying rent in arrears and restricting the landlord’s right to forfeit during future lockdowns.
The Judge considered the effects of the Covid-19 pandemic as “all relevant circumstances”. But said it was not “the purpose of the legislation (and so the court in exercising its discretion) to approve (opposed) amendments to the lease which would result in a change to the respective risks, obligations and benefits carried and enjoyed”. Lease renewal proceedings are not an opportunity for a tenant to try to insulate itself “against the commercial and trading risks they may face in a way that would either prejudice the landlord or interfere with their long term interests”.
How we can help
AK Law Solicitors represented the Landlord in Poundland v Toplain and specialise in all aspects of property law. Our team is able to assist on all transactional and contentious property matters with the firm typically acting for property management companies, investors and HNW individuals. We can be contacted on 020 8280 0810 or info@ak-law.co.uk to discuss your property law needs.
If you would like advice on contentious property law matters, including lease renewals under the Landlord and Tenant Act 1954, please contact Jonathan Riding, partner for property disputes, on 020 8280 0816 or jonathan@ak-law.co.uk.
Dated 5 July 2021
